On Tuesday, your San Antonio Chamber of Commerce kicked off its virtual Road to Session series with Texas Comptroller Glenn Hegar. The event was timely in that Comptroller Hegar had just released his revised revenue estimate the day before. The Road to Session series is an opportunity for business and community leaders to gain insight on the most pressing issues facing Texas. Given that we are experiencing unprecedented times, it has never been more important than now to fully understand how COVID-19 will impact Texas’ 87th Legislative Session in 2021.
Hegar reminded everyone that not only was Texas dealing with a public health crisis, it was also dealing with an energy crisis, because Saudi Arabia and Russia refused to go along with oil production cuts by the Organization of the Petroleum Exporting Countries (OPEC). Both crises had an impact on the Texas economy. He mentioned that sales tax revenue, the state’s single largest source of funding, is a key indicator for the health of the Texas economy. Hegar mentioned that April sales tax collections were down 9%, May collections were down 13%, and June collections were down 6%. He did note that there is a one-month lag with sales tax collections, so we should expect to see July’s collections early August. Economic stimulus payments, federal aid, and federal unemployment benefits helped minimize the impact of the downturn in sales tax collections.
While Texas was originally projected to have a $3 billion dollar surplus this current biennium and will now face a $4.6 billion deficit, Hegar remains optimistic citing the “various tools in the toolbox” available to help minimize the economic downturn. Tools include federal aid from the CARES Act, the state’s “Rainy Day Fund” – with a projected balance of just under $8.8 billion at the end of the current biennium – and an increase in sales tax revenue from online purchases.
Hegar attributes Texas being in a better economic position than other states because of our diverse economy. While Texas has received $13 billion in federal aid, $6 billion of which can only be used for COVID-19 related expenses, Hegar would like to see the federal government give states more latitude on how to spend the federal dollars for COVID-19 related expenses.
When asked about transportation funding, Hegar informed attendees that the Texas Department of Transportation (TxDOT) will receive its $2.5 billion from sales tax collections for the current biennium. Transportation funding from oil and gas severance taxes and motor vehicle sales taxes is expected to be down $1.5 billion than originally projected for this current budget biennium. Hegar has asked those in the transportation industry to smooth out payments over time to help offset the projected loss in revenue.
While many are interested knowing what the budget will look like next biennium, Hegar mentioned that it is too early to tell given the clouds of uncertainty. Better data moving forward along with actions taken by Congress will help him with future projections. Hegar concluded his remarks by mentioning Texas lawmakers want to keep their funding commitments they made to public education, but it depends on the health of the economy.
Hegar also took live questions from viewers regarding federal aid for small businesses, Chapter 313 economic development incentives, and expansion of Medicaid.
To watch a recording of the webinar, click here.
The next installment of the Chamber’s highly anticipated Road to Session series will feature Lt. Governor Dan Patrick (R-TX) and will take place Thursday, July 30, 2020 at 12:00pm. You can click here to register for the event.